"Those following developments in Europe fear another Lehman Brothers disaster, where one failure triggers several others and a global recession follows. This column suggests that recent history may already be repeating itself – but with even more severe consequences unless drastic action is taken.
The Eurozone is trapped in a debt crisis which is generating a massive lack of confidence in global financial markets, and which threatens to become systemic and plunge developed economies into a new recession (see on this site Muellbauer 2011). International investors have been running from European assets in a stampede that the two EU summits in July and August have failed to stop, and are now in a “wait-and-see” mode, making extremely difficult the renewal of huge amounts of public and private debt. Although the Eurozone as a whole will end 2011 with lower levels of public debt and deficit than the US or the UK, the poor management of the heterogeneity among members and the absence of efficient political institutions able to handle this heterogeneity are pushing financial stress in the Eurozone to limits even higher than those observed during the Lehman crisis..."
at http://www.voxeu.org/index.php?q=node/7369
The Eurozone is trapped in a debt crisis which is generating a massive lack of confidence in global financial markets, and which threatens to become systemic and plunge developed economies into a new recession (see on this site Muellbauer 2011). International investors have been running from European assets in a stampede that the two EU summits in July and August have failed to stop, and are now in a “wait-and-see” mode, making extremely difficult the renewal of huge amounts of public and private debt. Although the Eurozone as a whole will end 2011 with lower levels of public debt and deficit than the US or the UK, the poor management of the heterogeneity among members and the absence of efficient political institutions able to handle this heterogeneity are pushing financial stress in the Eurozone to limits even higher than those observed during the Lehman crisis..."
at http://www.voxeu.org/index.php?q=node/7369
